Salaries to rise 2.8 per cent

Employer optimism about the year ahead will translate into higher salaries for many workers across Canada.

Employers in Canada are expecting salaries to rise by an average of 2.8 per cent in 2015, according to Morneau Shepell's annual Compensation and Trends in Human Resources survey. This is up slightly from the average 2.6 per cent salary increase expected for 2014. The average includes expected salary freezes and excludes promotional or special salary adjustments.

"Employers are relatively optimistic about the coming year," said Michel Dubé, a principal in Morneau Shepell's compensation consulting practice. "Those expecting a significant increase in revenue, operating budgets and staffing outnumber those expecting decreases by four to one. Despite this optimism, employers are still cautious about the salary increases, which likely reflects reduced competitive pressures in an environment of relatively high unemployment and low inflation."

The survey showed higher than average expected salary increases in a few sectors. The mining and oil and gas sector expect average increases of 3.4 per cent. This is down from last year's expected salary increases of 3.9 per cent. Professional, scientific and technical services will also be higher than the national norms, at three per cent on average, reflecting increased competition for talent in this sector.

Lower than average increases are expected in certain industry groups that face more challenging economic circumstances. This includes wholesale and retail trade where average salary increases of 2.4 per cent are expected.

"Faced with tight salary budgets, organizations will be investing in programs that help to improve engagement and productivity," said Randal Phillips, executive vice-president and chief client officer at Morneau Shepell. "About half of the survey respondents indicated their priorities for 2015 would include improving the communication of total rewards programs, training and development programs, and workplace health and well-being."

Companies identified a number of specific priorities including improved mental health in the workplace. Workplace mental health is now the leading cause of sick leave and disability and is a growing concern in many companies. The Conference Board of Canada estimates that mental illness costs employers more than $20 billion per year. The survey finds almost 50 per cent of employers said they had mental health training for managers or were planning to implement training in the next 12 to 18 months.

To help fund training programs, organizations will also be looking for ways to reduce costs and be more efficient. Priorities include finding ways to reduce sick leave and disability costs, and reducing the cost of benefit and retirement plans.

For employers with defined benefit pension plans, about one-third indicated they would be reviewing plan design or employee cost-sharing; about one quarter would be looking at whether they should convert to defined contribution plans. According to Phillips, "This underscores the need for governments to open the door for alternatives, such as target benefits plans, to help preserve many of the benefits of our current pension system for employers and their employees."

Morneau Shepell's 32nd annual Compensation and Trends in Human Resources survey was conducted between mid-June and the end of July, with input from organizations employing a total of 800,000 people in Canada. The benchmark organizations represent a broad cross-section of industry sectors in Canada.